1. What is Credit Card Interest?

Credit card interest is the amount charged by credit card companies for carrying a balance. It's calculated based on your principal balance and annual percentage rate (APR).

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( I \) — Monthly interest charge
• \( P \) — Principal balance
• \( R \) — Monthly interest rate (APR ÷ 12)

Explanation: The formula calculates how much interest you'll pay each month on your outstanding balance.

3. Importance of Interest Calculation

Details: Understanding your monthly interest helps with budgeting and shows the true cost of carrying credit card debt.

4. Using the Calculator

Tips: Enter your current balance and APR. The calculator will show your estimated monthly interest charge.

5. Frequently Asked Questions (FAQ)

Q1: How is APR different from interest rate?
A: APR includes both the interest rate and any additional fees, giving a more complete picture of borrowing costs.

Q2: Does paying the minimum affect interest?
A: Yes, paying only the minimum means most of your payment goes toward interest, not reducing principal.

Q3: How can I reduce credit card interest?
A: Pay more than the minimum, pay on time, or consider balance transfer cards with 0% introductory APR.

Q4: Why does my interest vary month to month?
A: Interest is calculated daily based on your balance, so it changes as your balance and payments fluctuate.

Q5: What's a good APR for credit cards?
A: Average is 15-20%. Rates below 15% are good, while rates above 20% are considered high.